OHIO SUPREME COURT

RULES OF EVIDENCE PRECLUDE THE USE OF AN INSURED'S CRIMINAL "NO CONTEST" PLEA IN SUBSEQUENT DECLARATORY JUDGMENT LITIGATION


Elevators Mut. Ins. Co. v. J. Patrick O'Flaherty's, Inc., Slip Opinion No. 2010-Ohio-1043.

Syllabus of the Court:

Crim.R. 11(B)(2) and Evid.R. 410(A) prevent the use of convictions based on no contest pleas in an action for declaratory judgment for insurance coverage.

The Policy Language

In this case, the O’Flaherty’s policy provides coverage for loss or damage
from fire but expressly excludes coverage for “loss or damages caused directly or indirectly by any of the following ... Dishonest or criminal acts by you...”

In addition, the coverage part of the policy was subject to the following conditions:
“A. Concealment, Misrepresentation or Fraud[.] This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning * * * [a] claim under this Coverage Part.”

Elevators Mutual denied O’Flaherty’s claim for the fire loss and seeks to use Heyman’s convictions for arson and insurance fraud as conclusive evidence to deny coverage for the loss.

We must determine whether the convictions are admissible in this action for declaratory judgment.

The "No Contest" Plea and Crim.R. 11(B) and Evid.R. 410(A)

Richard Heyman pleaded no contest to the charges of arson and insurance fraud and was convicted. Crim.R. 11(A) provides that a defendant may plead no contest in a criminal matter. “The plea of no contest is not an admission of defendant’s guilt, but is an admission of the truth of the facts alleged in the indictment, information, or complaint, and the plea or admission shall not be used against the defendant in any subsequent civil or criminal proceeding.” Crim.R.11(B)(2).

Evid.R. 410(A)(2) echoes this same principle. A plea of no contest or the equivalent plea from another jurisdiction “is not admissible in any civil or criminal proceeding against the defendant who made the plea.” Id.

Elevators Mutual challenges the application of Evid.R. 410(A),stating that the rule applies only to a plea of no contest, not the resulting conviction. The Heymans, however, argue that the prohibition against admission of a no contest plea likewise applies to the conviction that follows. The Heymans also argue that Evid.R. 803(22) acknowledges that Evid.R. 410 prohibits the admission of evidence of a final judgment entered upon a plea of no contest.

The purpose behind the inadmissibility of no contest pleas in subsequent proceedings is to encourage plea bargaining as a means of resolving criminal cases by removing any civil consequences of the plea. Mapes, 19 Ohio St.3d at 111, 19 OBR 318, 484 N.E.2d 140; Rose v. Uniroyal Goodrich Tire Co. (C.A.10, 2000), 219 F.3d 1216, 1220. The rule also protects the traditional characteristic of the no contest plea, which is to avoid the admission of guilt. Id.

The prohibition against admitting evidence of no contest pleas was intended generally to apply to a civil suit by the victim of the crime against the defendant for injuries resulting from the criminal acts underlying the plea. Allstate Ins. Co. v Simansky (Conn.Super.1998), 45 Conn.Supp. 623, 628, 738 A.2d 231.

The plain language of Evid.R. 410(A) prohibits admission of a no contest plea, and the prohibition must likewise apply to the resulting conviction. To find otherwise would thwart the underlying purpose of the rule and fail to preserve the essential nature of the no contest plea.

OHIO SUPREME COURT

EMPLOYMENT INTENTIONAL TORT STATUTE CONSTITUTIONALITY - UPHELD
R.C. 2745.01 remains valid.

Kaminski v. Metal & Wire Prods. Co.,Slip Opinion No. 2010-Ohio-1027

Torts — Employer intentional torts — R.C. 2745.01 — R.C. 2745.01 does not violate Section 34 or 35, Article II, Ohio Constitution.
_________________
SYLLABUS OF THE COURT

R.C. 2745.01 does not violate Section 34 or 35, Article II of the Ohio
Constitution. (Johnson v. BP Chems., Inc. (1999), 85 Ohio St.3d 298, 707
N.E.2d 1107, limited.)

What The Court Held:

As we anticipated in our post of October, 4, 2007, the Ohio Supreme Court has determined that the current employment intentional tort statute is constitutional. In the case of Kaminski v. Metal & Wire Products, the contitutionality of the statute was found on the following basis:

[W]e hold that R.C. 2745.01 violates neither the plain language nor the plain meaning of Sections 34 or 35, Article II of the Ohio Constitution.

We find the construction of Sections 34 and 35 set forth in Johnson v. BP Chems., Inc. (1999),85 Ohio St.3d 298, 707 N.E.2d 1107, to be inconsistent with other decisions of this court, including decisions subsequent to Johnson.

Moreover, the provisions of the statute we review herein are significantly different from those of the statute reviewed in Johnson. Therefore while we do not specifically overrule the decision in that case, we limit its reach to apply only to the statutory provisions that were then at issue.

Because the judgment of the court of appeals in the case sub judice was based on Johnson’s flawed interpretations of Sections 34 and 35, we must reverse.

In Stetter, ___ Ohio St.3d ___, 2010-Ohio-1029, ___ N.E.2d ____, also decided this day, we uphold the constitutionality of R.C. 2745.01 in the face of challenges on other grounds. The net result of these two decisions is to confirm the constitutional validity of R.C. 2745.01.

Ohio Supreme Court - Insurance for Multiple Stabbing:

A policy that excludes coverage for injuries that arise out of the intentional or criminal acts of "any" insured, does NOT exclude coverage for claims of negligent entrustment or supervision brought against "any" other insured.

SAFECO INSURANCE COMPANY OF AMERICA, APPELLANT, v. WHITE ET AL.; FEDERAL INSURANCE COMPANY ET AL. Ohio Supreme Court, Decided August 4, 2009.

SUMMARY:
The Ohio Supreme Court has now held that when one insured commits an intentional act (in this case the multiple stabbing of a young girl), the homeowner insurance policy must still provide coverage for any claims that other insureds were negligent in supervising or entrusting the insured perpetrator. This is despite any exclusion that precludes coverage for bodily injury that arises out of the conduct of "any insured."

Specifically, the Court held:

1. When a liability insurance policy defines an "occurrence" as an "accident," a negligent act committed by an insured that is predicated on the commission of an intentional tort by another person, e.g., negligent hiring or negligent supervision, qualifies as an "occurrence."

2. Insurance-policy exclusions that preclude coverage for injuries expected or intended by an insured, or injuries arising out of or caused by an insured's intentional or illegal acts, do not preclude coverage for the negligent actions of other insureds under the same policy that are predicated on the commission of those intentional or illegal acts, e.g., negligent hiring or negligent supervision.

UNSOLICITED FAXES - INCLUDING TREBLE DAMAGES

COVERED UNDER "ADVERTISING INJURY" PROVISIONS OF COMMERCIAL INSURANCE POLICY

Motorist Mutual Insurance Company v. Dandy-Jim, Inc. et al., (May 14, 2009), 8th District Court of Appeals.

In Motorist Mutual, the insured allegedly sent numerous unsolicited facsimilies in violation of the TCPA. The insured submitted the claims to it's insurer, Motorist Mutual and demanded coverage under the "advertising injury" provisions of the policy. The Court of Appeals agreed and found coverage despite Motorist Mutual's arguments that: (i) certain exclusions applied; (ii) there was no triggering event under the coverage; and (iii) the nature of the claims were not within the ambit of the definition of "advertising injury."

The most interesting part of the decision in Motorist Mutual was that the treble damages authorized by the TCPA, and sought by the claimants, were not punitive in nature and were also covered under the policy. The Court reasoned that the claimants were not seeking punitive damages. Rather, they are "seeking damages under the TCPA. The amounts of such damages are specified by the statute. The TCPA provides for the higher of actual damages, or damages of $500 per violation. 47 U.S.C. §227(b)(3)(B). The award may be increased to "not more than 3 times the amount available under subparagraph (B)" if the violation was committed "willfully or knowingly." 47 U.S.C. §227(b)(3)."

"Motorists offered no evidence that Congress intended TCPA damages to be punitive in nature. To the contrary, the purpose of the statutory damage provision of the TCPA is to "liquidate uncertain actual damages and to encourage victims to bring suit to redress violations." In addition, damages under the TCPA are "set to be fair." Hence, the TCPA is a remedial law. "

"The public policy prohibiting the protection of insurance for punitive damages stems from the underlying assumptions that an individual should not be able to escape punishment for his or her intentionally malicious acts and that the deterrent effect of punitive damages would be diminished if tortfeasors can be indemnified against them. ... However, no showing of intentional malice is required to obtain treble damages under the TCPA if the fax advertisements were sent "willfully." "[T]o establish a willful violation of the TCPA for an award of treble damages, a plaintiff must prove that the defendant consciously and deliberately committed or omitted an act that violated the statute, irrespective of any intent to violate the law." Thus, a willful or knowing violation of the TCPA is different from an intentionally malicious act that could give rise to punitive damages."

"As the treble damage provision of the TCPA is not punitive in nature, we find no public policy prohibiting insurance coverage for treble damages under the TCPA."

NEW EMPLOYMENT INTENTIONAL TORT STATUTE

CONSTITUTIONALITY IN QUESTION

Ohio's new employment intentional tort statute (R.C. 2745.01) is under attack and losing in the Ohio Courts of Appeal. Most recently in Barry v A.E. Steel Erectors, Inc. and previously in Kaminski v. Metal & Wire Products,(March 18, 2008), Columbiana County App. No. 07-CO-15. Both of these Ohio Courts of Appeal decisions have found the new employment intentional tort unconstitutional.

The rationale employed by the Appellate Courts is that due to the excessive standard of requiring proof that the employer intended to cause injury, "it is clearly not 'a law that furthers the "*** comfort, health, safety and general welfare of all employee[e]s."' Johnson, 85 Ohio St. 3d at 308, quoting Brady, 61 Ohio St.3d at 633, quoting Section 34, Article II of the Ohio Constitution.

Additionally, "because R.C. 2745.01 is an attempt by the General Assembly to govern intentional torts that occur within the employment relationship, R.C. 2745.01 'cannot logically withstand constitutional scrutiny, inasmuch as it attempts to regulate an area that is beyond the reach of constitutional empowerment.'" Id., quoting Brady, 61 Ohio St.3d at 634.

Our postings have been anticipating this struggle since the enactment of the new statute.